Amazon's biggest competitor in the cloud: Salesforce.com?

Who is Amazon's biggest competitor in the cloud?

The go-to answer for many may be companies like Rackspace with its OpenStack platform, perhaps Google with its Compute Engine, Microsoft Azure, VMware or one of the up-and-coming cloud computing companies like Joyent.

But Mikhail Malamud, founder of cloud consultancy startup CloudAware, says another cloud company could pose the biggest challenge to Amazon's cloud plans: Salesforce.com.

These two companies, Amazon Web Services and Salesforce.com, are two of the leading cloud providers in their respective markets of infrastructure as a service (IaaS) for AWS and software as a service (SaaS) for Salesforce.com. But Malamud believes there is one reason why Salesforce.com could be a formidable foe for Amazon in the cloud moving forward: data.

Salesforce.com's data stash

"Data is the kingmaker in the cloud," says Malamud, whose firm, CloudAware, provides a platform to access AWS resources.

Salesforce.com has an enormous cache of customer data, and not just any data, but some of enterprises' most valuable data -- customer information. Salesforce.com has data about who its users' customers are, what interactions they have with those customers, and increasingly it's been attempting to collect even more data, from human resource management to social data.

And Salesforce is building an ecosystem of products and services around that data. While the company may be best known as a SaaS-based customer relationship management (CRM) application, it also has a robust platform that allows customers to build new applications on its cloud.

Force.com and Heroku, the latter of which Salesforce acquired in 2010, are platform as a service (PaaS) tools allowing customers to leverage CRM data already in Salesforce's cloud and build related applications that are customized to individual users' needs. It's where Malamud built his company's app. A Salesforce CRM customer, for example, could build an application on Force.com that integrates with the CRM application to analyze the sales data. And Malamud says every new application that's built in Salesforce.com's environment is one less app that's running in Amazon's cloud.

Amazon: We've got data too

Amazon is responding in turn, though. In the past year AWS has made a concerted effort to manage more of its customers' data. Announcements like Red Shift -- the company's headline announcement at its first-annual users conference, named re: Invent -- is a new data warehousing service, meant to be a low-cost alternative to expensive on-premises database storage systems. Amazon Glacier is a "cold storage" service for storing a company's long-term data, while Data Pipeline is a relatively new service that makes it easier to transfer all that data between various applications within Amazon's cloud. "They're clearly trying to get as much of your data as possible," Malamud says.

Malamud says Salesforce will be the place where next-generation apps will be built, providing a legitimate threat to Amazon moving forward.

"It's a legitimate theory, but it's more of a longer term play," says David Vellante, chief analyst at research firm The Wikibon Project, about the Salesforce.com-Amazon rivalry. The two companies are not really direct competitors right now, he says. They're both cloud-based, but AWS at its core is about providing fast, easy and cheap access to virtual machines, storage and hosted applications in its IaaS cloud. Salesforce.com is a SaaS that is attempting to build up its accompanying PaaS.

Amazon's bigger near-term competitors are the growing cavalry of IaaS providers looking to steal business from the company, he says. Google, Microsoft and Rackspace (with its OpenStack platform), as well as VMware, HP, Dell, Joyent, Terremark and Savvis, are just some of the whole range of IaaS providers looking to bite into Amazon's market share that pose a more immediate threat to AWS.

Robert Mahowald, research vice president at IDC who leads the software as a service (SaaS) and cloud services practice, agrees with Vellante. "It's not necessarily where the companies are today, but it's certainly an aspiration of Salesforce," he says. But he's also on board with Malamud's core premise of "follow the data."

Applications that run in the cloud are fundamentally more important than the infrastructure they run on, so in that sense Salesforce has an advantage in being able to offer customers products, services and platforms that leverage data already in its cloud.

But AWS is a heavy-hitter in the cloud, too. Through partnerships with big enterprise software giants like SAP, Oracle and Microsoft, AWS allows customers to migrate their existing enterprise software licenses to Amazon's cloud and let AWS worry about all the underlying infrastructure.

Salesforce.com has a different business model: The company isn't pushing customers to migrate their SAP, Oracle and Microsoft apps into its cloud; they want customers to be all-in with its own cloud. So far, the company has done an extraordinary job capturing the CRM market, but existing business apps aren't being migrated into Salesforce's cloud.

To Mahowald, that means the Amazon vs. Salesforce debate comes down to a new vs. existing apps debate. Amazon has everything in place to give customers the opportunity to outsource their packaged software onto its cloud, something enterprises are becoming more and more comfortable with. Salesforce wants to be the place where the enterprises' next-generation business apps are built and stored.

The problem for AWS is that there are increasingly more and more competitors offering similar IaaS services. To date, Amazon has simply done it better than its competitors, Vellante says -- it out-innovates competitors, has a broader range of services and continually lowers its prices. It's tough for competitors to keep up, but a crop of providers are trying.

Some providers are carving out niches in vertical markets, offering healthcare-, government- or financial services-focused clouds, for example. Others are banking on the hybrid cloud -- which combines both on-premises and public cloud resources -- as being the future the industry. VMware, sensing an opportunity in the market, recently announced plans to create a hybrid cloud offering.

Salesforce isn't competing with those offerings, though, Vellante says. Salesforce has found a niche in its ecosystem of customers and is nurturing and growing it. But Salesforce.com is not the be all and end all of cloud service providers now or into the future. "If you're running a big data app and you need a 10-node cluster spun up today to host your analytics app, you're not going to Salesforce," Vellante says. "You're going to Amazon or another IaaS." It's a different play for each of the providers, which is why Vellante says both of these companies -- AWS and Salesforce.com -- will be around for a long time, and they both likely will make a lot of money in the cloud.